Cutting underperforming lines saw the US retailer post $2bn sales for the first quarter of 2021, as well as 84% growth ©Getty Images
Cutting underperforming lines saw the US retailer post $2bn sales for the first quarter of 2021, as well as 84% growth ©Getty Images

How one retailer reduced its inventory to double sales

27 August 2021

Dropping underperforming inventory quickly repaired its flagging sales

Cutting loose its underperforming brands has enabled US homegoods store Bed Bath & Beyond to take control of its inventory. The company reported a 95% in-stock level for most items and “definitely even higher” for some key items, according to company CEO Mark Tritton in June.

2021 is the firm’s 50th anniversary year and to mark the occasion it has launched a three-year transformation project plus three-year growth plan.

During a period of inventory decline for many companies in various sectors – due to inability to secure enough raw materials or products – Bed Bath & Beyond reported in June that it had dropped its inventory by 30% compared with last year. However, it said this was a strategic decision and not due to shortages or cost pressure.

The firm had decided to switch focus to top-performing goods that allow higher rates of fulfilment and distribution – and, of course, sales. In other words, it is making “more sales on less inventory”, said Tritton. It proved a success and Bed Bath & Beyond reported $2bn sales for the first quarter of 2021 and 84% growth, “nearly double 2019 levels”.

The need to modernise

After years of coping with archaic systems and processes, the constraints became unmanageable last year due to the pandemic and the company found it necessary to quickly change to digital ordering and faster deliveries in order to remain competitive. This groundwork had an immediate positive effect and spurred the company to plan a $250m investment in a “digital-first, omni-always” transformation.

“We are modernising our infrastructure to support our strategy and pursue greater operational efficiencies by enhancing our supply chain and technological foundation. We’ve made progress towards reinventing our financial, inventory management, and merchandising capabilities through our technology transformation,” said Tritton while announcing the quarterly figures.

The retailer is turning to technology, digitisation and AI to better manage its inventory and fulfilment. Reaching the end of phase one preparations, it now intends to roll out an ERP migration, as well as software to introduce forecasting capabilities. It will enable managers to use real-time and analytics to monitor products in the supply chain up to point of sale.

Process enhancements

The previous system of moving stock between central warehouses created too many gaps, very long delays and a high level of missing inventory, so it decided to overhaul fulfilment and distribution. In addition to the pared-down inventory of only well-performing products, the company is building a new distribution centre and working with a logistics partner to develop a new replenishment process that will incorporate its four existing regional distribution centres.

Together, these changes are hoped to reduce current replenishment time from 35 to 10 days. The new technologies in supply and in store will complement the physical overhauls of stock and store, to create an all-round slick and efficient inventory management system that will help build upon the successful changes of last year.

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